George Osborne Open To Ditching 2% Inflation Target

George Osborne Open To Ditching 2% Inflation Target

George Osborne acknowledged today there was a "debate going on" about the future of monetary policy amid claims that the Government could ditch the Bank of England's 2% inflation target.

The Chancellor insisted he had "no plans" to change the current regime and would only do so if there were to be "very significant rewards" for doing so.

But, appearing before MPs on the Treasury Select Committee, he appeared to hold open the door to such a move.

There have been reports that ministers are considering giving the Bank of England a new target to promote growth in what would be a major shift of focus for interest rate-setters on the Monetary Policy Committee.

Mr Osborne said: "We have an inflation-targeting regime which has served this country well and provided stability. There is a debate about the future of monetary policy, not in the UK exclusively but in many, many countries."

Mr Osborne said there was "innovative stuff happening around the world", including by the US Federal Reserve, and said the incoming governor of the Bank of England Mark Carney was "part of that debate".

"There is a debate going on. I'm glad the future Bank of England governor is part of that debate.

"Of course any decisions about the framework are decisions for the Government, a government accountable to parliament."

Asked whether he was dissatisfied with the 2% target, he said: "I would say it has served us well. That is the point I would make and I think therefore if you were to move away from it you would want to be satisfied and parliament would want to be satisfied that you were getting some very significant rewards in return for moving away from that."

He went on: "It's totally to be expected after everything that has happened to the international economy, and indeed to the British economy over the last four or five years, that there is a debate about the future of monetary policy.

"What I regard to be my job obviously, to be accountable to parliament for this, is to determine that framework. But in the meantime we can make sure we can have fiscal policy which is credible and enables the Bank of England to do what it needs to do.

"But as I say, I have no plans to change the framework, there is a debate going on."

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